Exhibit 1.1
2,000,000 SHARES OF COMMON STOCK
AMBASSADOR EYEWEAR GROUP, INC.
UNDERWRITING AGREEMENT
_____________, 1997
Hampshire Securities Corporation
As Representative of the several
Underwriters named in Schedule I
attached hereto
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Gentlemen:
The undersigned, Ambassador Eyewear Group, Inc., a Delaware corporation
(the "Company"), hereby confirms its agreement with Hampshire Securities
Corporation (individually, "Hampshire," and, as representative (the
"Representative") of the several underwriters named in Schedule I hereto (the
Representative and the underwriters are collectively referred to as the
"Underwriters"), and the Underwriters as follows:
1. INTRODUCTION.
(a) The Company proposes to issue and sell to the Underwriters an
aggregate of 2,000,000 shares of common stock, par value $.01 per share (the
"Common Stock"), of the Company. Such shares of Common Stock are hereinafter
referred to as the "Firm Stock."
(b) Solely for the purpose of covering over-allotments, if any, the
Company proposes to grant to Hampshire, individually and not as Representative,
an option (the " Over-allotment Option") to purchase from it, in the aggregate,
up to an additional 300,000 shares of Common Stock at the public offering price
less the underwriting discount. Such shares of Common Stock are hereinafter
referred to as the " Additional Stock." The Firm Stock and the Additional Stock
are hereinafter referred to as the " Stock."
(c) The Company proposes to sell to Hampshire, individually and not
as Representative, 200,000 warrants (the " Representative's Warrants") to
purchase up to an aggregate of 200,000 shares of Common Stock (the "Warrant
Shares") for a purchase price of $.001 per Representative's Warrant, or an
aggregate purchase price of $200.00. The Representative's Warrants shall be
substantially in the form filed as an exhibit to the Registration Statement (as
hereinafter defined). The Representative's Warrants and the Warrant Shares are
hereinafter referred to collectively as the "Representative's Securities." The
Stock and the Representative's Securities are hereinafter referred to
collectively as the "Securities."
2. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants to, and agrees with, the
several Underwriters that:
(1) The Company has filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form SB-2
(Registration No. 333-_______), and may have filed one or more amendments
thereto and a Rule 462(b) Registration Statement (as hereinafter defined) in
accordance with Rule 462(b) under the Securities Act of 1933, as amended (the
"Securities Act"), including in the Registration Statement and each such
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amendment a related preliminary prospectus, for the registration of the
Securities under the Securities Act. As used in this Agreement, the term
"Registration Statement" shall refer to such registration statement referred to
in the first sentence of this Section 2(a)(1), as amended, on file with the
Commission at the time the Registration Statement is declared by the Commission
to be effective under the Securities Act (including the prospectus, financial
statements, and exhibits filed as a part thereof, PROVIDED, HOWEVER, that the
Registration Statement, at the time it is declared by the Commission to be
effective under the Securities Act, may omit such information as is permitted to
be omitted from the Registration Statement when it becomes effective under the
Securities Act pursuant to Rule 430A of the General Rules and Regulations of the
Commission under the Securities Act (the "Regulations"), which information (the
"Rule 430A Information") shall be deemed to be included in the Registration
Statement when a final prospectus is filed with the Commission in accordance
with Rules 430A and 424(b)(1) or (4) of the Regulations and includes any Rule
462(b) Registration Statement); the term "Preliminary Prospectus" shall refer to
each prospectus included in the Registration Statement, or any amendments
thereto, before the Registration Statement is declared by the Commission to be
effective under the Securities Act, the form of prospectus omitting Rule 430A
Information included in the Registration Statement when the Registration
Statement becomes effective under the Securities Act, if applicable (the "Rule
430A Prospectus"), and any prospectus filed by the Company with the consent of
the Representative pursuant to Rule 424(a) of the Regulations; and the term
"Prospectus" shall refer to the final prospectus forming a part of the
Registration Statement in the form first filed with the Commission pursuant to
Rule 424(b)(1) or (4) of the Regulations or, if no such filing is required, the
form of final prospectus forming a part of the Registration Statement. As used
in this
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Agreement, the term "Rule 462(b) Registration Statement" means the Registration
Statement and any amendments thereto filed pursuant to Rule 462(b) of the
Regulations relating to the offering covered by the initial Registration
Statement.
(2) When the Registration Statement becomes effective under the
Securities Act, and at all times subsequent thereto up to and including the
Closing Date (as defined in Section 3(a) hereof) and each Additional Closing
Date (as defined in Section 3(b) hereof), and during such longer period as the
Prospectus may be required to be delivered in connection with sales by the
Underwriters or a dealer, and during such longer period until any post-effective
amendment thereto shall become effective under the Securities Act, the
Registration Statement (and any post-effective amendment thereto) and the
Prospectus (as amended or as supplemented if the Company shall have filed with
the Commission any amendment or supplement to the Registration Statement or the
Prospectus) will contain all statements which are required to be stated therein
in accordance with the Securities Act and the Regulations, will comply with the
Securities Act and the Regulations, and will not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and no event will
have occurred which should have been set forth in an amendment or supplement to
the Registration Statement or the Prospectus which has not then been set forth
in such an amendment or supplement; if a Rule 430A Prospectus is included in the
Registration Statement at the time it is declared by the Commission to be
effective under the Securities Act, the Prospectus filed pursuant to Rules 430A
and 424(b)(1) or (4) of the Regulations will contain all Rule 430A Information
and all statements which are required to be stated therein in accordance with
the Securities Act or the Regulations, will comply with the Securities Act and
the Regulations,
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and will not contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading; and each Preliminary Prospectus, as of the
date filed with the Commission, contained all statements required to be stated
therein in accordance with the Securities Act and the Regulations, complied with
the Securities Act and the Regulations, and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading; except that
no representation or warranty is made in this Section 2(a)(2) with respect to
statements or omissions made in reliance upon, and in conformity with, written
information furnished to the Company as stated in Section 8(b) with respect to
any Underwriter by, or on behalf of, such Underwriter through the Representative
expressly for inclusion in the Registration Statement, any Preliminary
Prospectus, or the Prospectus, or any amendment or supplement thereto.
(3) Neither the Commission nor the "blue sky" or securities
authority of any jurisdiction has issued an order (a "Stop Order") suspending
the effectiveness of, or preventing or suspending the use of, the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, refusing to permit the effectiveness of the Registration
Statement, or suspending the registration or qualification of the Securities nor
has any of such authorities instituted or threatened to institute any
proceedings with respect to a Stop Order.
(4) Any contract, agreement, instrument, lease, or license
required to be described in the Registration Statement or the Prospectus has
been properly described therein. Any contract, agreement, instrument, lease, or
license required to be filed as an exhibit to the
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Registration Statement has been filed with the Commission as an exhibit to the
Registration Statement.
(5) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of and
from, and declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals, to own, lease,
license, and use its properties and assets and to conduct its business in the
manner described in the Prospectus. The Company is duly qualified to do
business as a foreign corporation and is in good standing as such in every
jurisdiction in which its ownership, leasing, licensing, or use of property and
assets or the conduct of its business makes such qualification necessary, except
where the failure to so qualify will not have a material adverse effect on the
Company's business, properties, or financial condition on a consolidated basis.
(6) The authorized capital stock of the Company consists of (i)
10,000,000 shares of Common Stock, of which 3,500,000 shares are outstanding,
(ii) 1,000,000 shares of Blank Check Preferred Stock, par value $.01 per share,
none of which are outstanding and (iii) 118,100 shares of Series A Cumulative
Redeemable Preferred Stock, of which 118,100 are outstanding. Each outstanding
share of Common Stock is validly authorized and issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, has not been issued and is not owned or held in violation of any
preemptive or similar rights of stockholders. There is no commitment, plan, or
arrangement to issue, and no outstanding option, warrant, or other right calling
for the issuance of, any share of capital stock of the Company or any
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security or other instrument which by its terms is convertible into, or
exercisable or exchangeable for, capital stock of the Company, except as may be
properly described in the Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company, except as may be properly
described in the Prospectus. The certificates evidencing the Common Stock are
in due and proper form.
(7) The consolidated financial statements of the Company
included in the Registration Statement and the Prospectus fairly present, with
respect to the Company, the financial position, the results of operations, the
cash flows, and the other information purported to be shown therein at the
respective dates and for the respective periods to which they apply. Such
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles (except to the extent that certain
footnote disclosures regarding any stub period may have been omitted in
accordance with the applicable rules of the Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) consistently applied
throughout the periods involved, are correct and complete in all material
respects, and are in accordance with the books and records of the Company.
Xxxxxxx X. Xxxxxx & Company, LLP, the accountants whose report on the audited
consolidated financial statements is filed with the Commission as a part of the
Registration Statement, are, and during the periods covered by their reports
included in the Registration Statement and the Prospectus were, independent
certified public accountants with respect to the Company within the meaning of
the Securities Act and the Regulations. X. X. Xxxx LLP, the accountants whose
report on the audited consolidated financial statements is filed with the
Commission as a part of the Registration Statement, were, during the periods
covered by their reports included in the Registration Statement and
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the Prospectus, independent certified public accountants with respect to
Renaissance Eyewear, Inc., a company acquired by the Company in February 1997,
within the meaning of the Securities Act and the Regulations. No other
financial statements are required by Form SB-2 or otherwise to be included in
the Registration Statement or the Prospectus. There has at no time been a
material adverse change in the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company on
a consolidated basis from the latest information set forth in the Registration
Statement or the Prospectus, except as may be properly described in the
Prospectus.
(8) There is no litigation, arbitration, claim, governmental or
other proceeding (formal or informal), or investigation pending, threatened, or,
to the best knowledge of the Company, in prospect (or any basis therefor) with
respect to the Company, or any of its operations, businesses, properties, or
assets, except as may be properly described in the Prospectus or such as
individually or in the aggregate do not now have, and will not in the future
have, a material adverse effect upon the operations, business, properties, or
assets of the Company. To the best knowledge of the Company, it is not in
violation of, or in default with respect to, any law, rule, regulation, order,
judgment, or decree, except as may be properly described in the Prospectus or
such as in the aggregate do not now have, and will not in the future have, a
material adverse effect upon the operations, business, properties, or assets of
the Company; nor is the Company currently required to take any action in order
to avoid any such violation or default.
(9) The Company has good and marketable title to all properties
and assets which the Prospectus indicates are owned by it, free and clear of all
liens, security interests, pledges, charges, encumbrances, and mortgages, except
as may be properly described in the
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Prospectus or as are not material to the Company. No real property owned,
leased, licensed, or used by the Company lies in an area which is, or to the
knowledge of the Company will be, subject to zoning, use, or building code
restrictions which would prohibit, and no state of facts relating to the actions
or inaction of another person or entity or his or its ownership, leasing,
licensing, or use of any real or personal property exists or will exist which
would prevent, the continued effective ownership, leasing, licensing, or use of
such real property in the business of the Company, each as presently conducted
or as the Prospectus indicates it contemplates conducting, except as may be
properly described in the Prospectus.
(10) Neither the Company nor, to the knowledge of the Company,
any other party, is now, or is expected by the Company to be, in violation or
breach of, or in default with respect to, any provision of any contract,
agreement, instrument, lease, license, arrangement, or understanding which is
material to the Company, and each such contract, agreement, instrument, lease,
license, arrangement, and understanding is in full force and effect and is the
legal, valid, and binding obligation of the parties thereto and is enforceable
as to them in accordance with its respective terms. The Company enjoys peaceful
and undisturbed possession under all leases and licenses under which it is
operating. Except as described in the Prospectus, the Company is not a party
to, or bound by, any contract, agreement, instrument, lease, license,
arrangement, or understanding, or subject to any charter or other restriction,
which has had, or may in the future have, a material adverse effect on the
financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company. The Company is not in violation
or breach of, or in default with respect to, any term of its respective
certificate of incorporation (or other charter document) or by-laws.
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(11) The Company owns or possesses adequate rights to use all
patents, patent rights, inventions, trade secrets, licenses, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names, and copyrights described or referred to in the Prospectus as
owned or used by it or which are necessary for the conduct of its business as
currently conducted as described in the Prospectus and, to the best knowledge of
the Company, its business as contemplated as described in the Prospectus. To
the best knowledge of the Company, all such patents, patent rights, licenses,
trademarks, service marks, and copyrights are (i) valid and enforceable, (ii)
not being infringed by any third parties which infringement could, singly or in
the aggregate, materially and adversely affect the business, properties,
operations, condition (financial or otherwise), results of operations, income,
or business prospects of the Company, as presently being conducted or as
proposed to be conducted as described in the Prospectus, and (iii) are
uncontested by any third party. The Company has no knowledge of, nor has it
received any notice of, infringement of, or conflict with, asserted rights of
others with respect to any patents, patent rights, inventions, trade secrets,
licenses, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding could
materially and adversely affect the business, properties, operations, condition
(financial or otherwise), results of operations, income, or business prospects
of the Company, as presently being conducted or as proposed to be conducted as
described in the Prospectus.
(12) Neither the Company nor, to the best knowledge of the
Company, any director, officer, agent, employee, or other person associated
with, or acting on behalf of, the Company has, directly or indirectly (i) used
any corporate funds for unlawful contributions, gifts,
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entertainment, or other unlawful expenses relating to political activity; (ii)
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds; (iii) violated any provision of the Foreign Corrupt Practices
Act of 1977, as amended; or (iv) made any bribe, rebate, payoff, influence
payment, kickback, or other unlawful payment. The Company's internal accounting
controls and procedures are sufficient to cause the Company to comply in all
respects with the Foreign Corrupt Practices Act of 1977, as amended.
(13) The Company has all requisite power and authority to
execute, deliver, and perform each of this Agreement and the Representative's
Warrants. All necessary corporate proceedings of the Company have been duly
taken to authorize the execution, delivery, and performance by the Company of
this Agreement and the Representative's Warrants. This Agreement has been duly
authorized, executed, and delivered by the Company, is the legal, valid, and
binding obligation of the Company. The Representative's Warrants have been
duly authorized by the Company and, when executed and delivered by the Company,
will be legal, valid, and binding obligations of the Company, each enforceable
as to the Company in accordance with its terms. No consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local, or other governmental authority or any
court or other tribunal is required by the Company for the execution, delivery,
or performance by the Company of this Agreement or the Representative's
Warrants, except filings under the Securities Act which have been or will be
made before the Closing Date, and consents consisting only of consents under
"blue sky" or securities laws which have been obtained at or prior to the date
of this Agreement. No consent of any party to any contract, agreement,
instrument, lease, license,
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arrangement, or understanding to which the Company is a party, or to which any
of its properties or assets are subject, is required for the execution,
delivery, or performance of this Agreement and the Representative's Warrants;
and the execution, delivery, and performance of this Agreement and the
Representative's Warrants will not violate, result in a breach of, conflict
with, result in the creation or imposition of any lien, charge, or encumbrance
upon any properties or assets of the Company pursuant to the terms of, or, with
or without the giving of notice or the passage of time or both, entitle any
party to terminate or call a default under, any such contract, agreement,
instrument, lease, license, arrangement, or understanding, or violate, result in
a breach of, or conflict with any term of the certificate of incorporation (or
other charter document) or by-laws of the Company, or violate, result in a
breach of, or conflict with, any law, rule, regulation, order, judgment, or
decree binding on the Company or to which any of its operations, businesses,
properties, or assets are subject.
(14) The Firm Stock is validly authorized and, when issued and
delivered in accordance with this Agreement, will be validly issued, fully paid,
and nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive or similar rights
of stockholders, and the Underwriters will receive good title to the shares of
Firm Stock purchased by them, respectively, free and clear of all liens,
security interests, pledges, charges, encumbrances, stockholders' agreements,
and voting trusts. The Additional Stock is validly authorized and, when issued
in accordance with the terms hereof, will be validly issued, fully paid, and
nonassessable, without any personal liability attaching to the ownership
thereof, and will not be issued in violation of any preemptive or similar rights
of stockholders. The
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Additional Stock has been duly and validly reserved for issuance. The Stock
conforms to all statements relating thereto contained in the Registration
Statement and the Prospectus.
(15) The Warrant Shares are validly authorized and has been duly
and validly reserved for issuance and, when issued and delivered upon exercise
of the Representative's Warrants in accordance with the terms thereof, will be
validly issued, fully paid, and nonassessable, without any personal liability
attaching to the ownership thereof, and will not be issued in violation of any
preemptive or similar rights of stockholders; and the holders of the
Representative's Warrants will receive good title to the Warrant Shares free
and clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts. The Representative's Securities
conform to all statements relating thereto contained in the Registration
Statement and the Prospectus.
(16) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus, and except as may
otherwise be properly described in the Prospectus, the Company has not (i)
issued any securities or incurred any material liability or material obligation,
primary or contingent, for borrowed money, (ii) entered into any material
transaction not in the ordinary course of business, (iii) declared or paid any
dividend on its capital stock or (iv) experienced any adverse changes or any
development which may materially adversely effect the condition (financial or
otherwise), net assets or stockholders' equity, results of operations, business,
key personnel, assets, or properties of the Company and the Subsidiaries taken
as a whole.
(17) Neither the Company nor any of its officers, directors, or
affiliates (as defined in the Regulations), has taken or will take, directly or
indirectly, prior to the termination
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of the offering contemplated by this Agreement, any action designed to stabilize
or manipulate the price of any security of the Company, or which has caused or
resulted in, or which might in the future reasonably be expected to cause or
result in, stabilization or manipulation of the price of any security of the
Company, to facilitate the sale or resale of any of the Firm Stock or the
Additional Stock.
(18) The Company has obtained from each of its directors,
officers, and stockholders a written agreement, in form and substance
satisfactory to counsel for the Underwriters, that, for a period of eighteen
(18) months from the date on which the Registration Statement is declared by the
Commission to be effective under the Securities Act, he, she, or it will not,
without the prior written consent of the Representative, publicly offer, pledge,
sell, hypothecate, contract to sell, grant any option for the sale of, or
otherwise dispose of, directly or indirectly, any shares of Common Stock or any
security or other instrument which by its terms is convertible into, or
exercisable or exchangeable for, shares of Common Stock or other securities of
the Company, including, without limitation, any shares of Common Stock issuable
pursuant to the terms of any employee stock options; PROVIDED, HOWEVER, that
such persons may offer, sell, contract to sell, grant an option for the sale of,
or otherwise dispose of all or any part of his, her, or its shares of Common
Stock or other such security or instrument of the Company during such period if
such transaction is private in nature and the transferee of such shares of
Common Stock or other securities or instruments agrees, prior to such
transaction, to be bound by all of the provisions of such agreement.
(19) The Company is not, and does not intend to conduct its
business in a manner in which it would be required to register as, an
"investment company" as defined in the
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Investment Company Act of 1940, as amended (the "Investment Company Act"), and
the rules and regulations promulgated thereunder.
(20) No person or entity has the right to require registration of
shares of Common Stock or other securities of the Company because of the filing
or effectiveness of the Registration Statement, which right has not been waived.
(21) Except as may be set forth in the Prospectus, the Company
has not incurred any liability for a fee, commission, or other compensation on
account of the employment of a broker or finder in connection with the
transactions contemplated by this Agreement.
(22) Neither the Company, nor any of their respective affiliates,
is presently doing business with the government of Cuba or with any person or
affiliate located in Cuba. If, at any time after the date on which the
Registration Statement is declared by the Commission to be effective under the
Securities Act or with the Florida Department of Banking and Finance (the
"Florida Department"), whichever is later, and prior to the end of the period
referred to in the first clause of Section 2(a)(2) hereof, the Company and any
Subsidiary commences engaging in business with the government of Cuba or with
any person or affiliate located in Cuba, the Company will so inform the Florida
Department within 90 days after such commencement of business in Cuba, and,
during the period referred to in Section 2(a)(2) hereof, will inform the Florida
Department within 90 days after any change occurs with respect to previously
reported information.
(23) No officer, director, or stockholder of the Company has any
affiliation or association with the National Association of Securities Dealers,
Inc. (the "NASD") or any member thereof.
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(24) Except as disclosed in the Prospectus, the Company has filed
all necessary federal, state, local, and foreign income and franchise tax
returns and other reports required to be filed and has paid all taxes shown as
due thereon; and there is no tax deficiency which has been, or, to the knowledge
of the Company, might be, asserted against the Company.
(25) To the best knowledge of the Company, none of the activities
or business of the Company is in violation of, or will cause the Company to
violate, any law, rule, regulation, or order of the United States, any state,
county, or locality, or of any agency or body of the United States or of any
state, county, or locality, the violation of which would have a material adverse
effect upon the condition (financial or otherwise), business, property,
prospective results of operations, or net worth of the Company.
(26) The Common Stock has been approved for quotation on the
Nasdaq National Market.
3. PURCHASE, SALE, AND DELIVERY OF THE STOCK AND THE REPRESENTATIVE'S
WARRANTS.
(a) On the basis of the representations, warranties, covenants, and
agreements of the Company herein contained, but subject to the terms and
conditions herein set forth, the Company agrees to issue and sell to the
Underwriters and the Underwriters, severally and not jointly, agree to purchase
from the Company, the numbers of shares of Firm Stock set forth opposite the
respective names of the Underwriters in Schedule I hereto.
The purchase price per share of the Firm Stock to be paid by the
several Underwriters shall be $4.50. The initial public offering price per
share of the Firm Stock shall be $5.00.
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Payment for the Firm Stock by the Underwriters shall be made by
certified or official bank check in New York Clearing House (next day) funds or
by electronic wire transfer of next day funds, payable to the order of the
Company, at the offices of Hampshire , 000 Xxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx,
Xxx Xxxx 00000, or at such other place in the New York City metropolitan area as
the Representative shall determine and advise the Company by at least two (2)
full days' notice in writing, upon delivery of the Firm Stock to the
Representative for the respective accounts of the Underwriters. Such delivery
and payment shall be made at 9:00 a.m., New York City local time, on the third
(3rd) business day following the Time of the initial public offering, as
defined in Section 11(a) hereof (unless such time and date is postponed in
accordance with the provisions of Section 9(c) hereof), or at such other time as
shall be agreed upon between the Representative and the Company. The time and
date of such delivery and payment are hereinafter referred to as the "Closing
Date."
Certificates representing the Firm Stock shall be registered in such
name or names and in such authorized denominations as the Representative may
request in writing at least two full business days prior to the Closing Date.
The Company shall permit the Representative to examine and package such
certificates for delivery at least one (1) full business day prior to the
Closing Date.
The Company hereby grants to Hampshire the Company
Over-allotment Option to purchase up to 300,000 shares of Common Stock, as may
be necessary to cover over-allotments, at the same purchase price per share to
be paid by the several Underwriters to the Company for the Firm Stock as
provided for in this Section 3 hereof. The Over-allotment Option may be
exercised only to cover over-allotments in the sale of shares by Hampshire. The
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Over-allotment Option may be exercised by Hampshire on the basis of the
representations, warranties, covenants, and agreements of the Company herein
contained, but subject to the terms and conditions herein set forth, at any time
and from time to time on or before the forty-fifth (45th) day following the date
on which the Registration Statement becomes effective under the Securities Act,
by written notice by Hampshire to the Company and Custodian. Such notice shall
set forth the aggregate number of shares of Additional Stock as to which the
Over-allotment Option is being exercised, the name or names in which the
certificates representing the Additional Stock are to be registered, the
authorized denominations in which the Additional Stock is to be registered, and
the time and date, as determined by Hampshire, when such shares of Additional
Stock are to be delivered (each such time and date are hereinafter referred to
as an "Additional Closing Date"); PROVIDED, HOWEVER, that no Additional Closing
Date shall be earlier than the Closing Date nor earlier than the second (2nd)
business day after the date on which the notice of the exercise of the
Over-allotment Option shall have been given nor later than the eighth (8th)
business day after the date on which such notice shall have been given.
In the event the Company declares or pays a dividend or a distribution
on the Common Stock, whether in the form of cash, shares of Common Stock, or
other consideration, prior to the Additional Closing Date, such dividend or
distribution shall also be paid on the Additional Stock on the later of the
Additional Closing Date or the date on which such dividend or distribution is
payable.
Payment for the shares of Additional Stock by Hampshire shall be made
by certified or official bank check in New York Clearing House (next day) funds
or by electronic wire transfer of next day funds payable to the order of the
Custodian and the Company (pro rata as described
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above) at the offices of Hampshire Securities Corporation, 000 Xxxxx Xxxxxx,
00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or at such other place in the New York
City metropolitan area as Hampshire shall determine and advise the Company by at
least two (2) full days' notice in writing, upon delivery of the shares of
Additional Stock to Hampshire for its account.
Certificates for the shares of Additional Stock shall be registered in
such name or names and in such authorized denominations as Hampshire may request
in writing at least two (2) full business days prior to the Additional Closing
Date with respect thereto. The Company shall permit Hampshire to examine and
package such certificates for delivery at least one (1) full business day prior
to the Additional Closing Date with respect thereto.
(c) The Company hereby agrees to issue and sell to Hampshire and/or
its designees on the Closing Date the Representative's Warrants to purchase the
Warrant Shares for an aggregate purchase price of $200.00.
(d) During the four-year (4) period commencing one (1) year from the
effective date of the Registration Statement, the Company will agree to use its
best efforts to register the Representative's Warrants and the Warrant Shares
when and if requested by the Representative. These best efforts shall include
the preparation and filing of one (1) demand registration statement with respect
to the Warrant Shares during such four-year (4) period and maintaining the
effectiveness thereof, for nine (9) months or such shorter period as may be
required for the sale of the Warrant Shares in the open market, at the Company's
sole expense (other than underwriter or selling broker costs), including "blue
sky" fees and expenses. The Company agrees that for the period starting at the
beginning of the second (2nd) year and concluding at the end of the seventh
(7th) year after the effective date of the Registration Statement, the Company
will
-19-
notify all holders of the Representative's Warrants and Warrant Shares of the
Company's intention to engage in another public offering of the Company's
securities (whether by the Company or by any security holder of the Company),
and, if requested by the Representative, include any Representative's Warrants
and Warrant Shares in such offering at the Company's sole expense and maintain
the effectiveness thereof for at least twelve (12) months.
Delivery and payment for the Representative's Warrants shall be made
on the Closing Date. The Company shall deliver to Hampshire, upon payment
therefor, certificates representing the Representative's Warrants in the name
or names and in such authorized denominations as Hampshire may request. The
Representative's Warrants shall be exercisable for a period of four years
commencing one year from the date on which the Registration Statement was
declared effective under the Securities Act at an initial exercise price per
Warrant Share equal to $5.50.
(d) It is understood that the Hampshire may (but shall not be
obligated to) make any and all the payments required pursuant to this Section 3
on behalf of any Underwriters whose check or checks shall not have been received
by the Representative at the time of delivery of the Stock to be purchased by
such Underwriter or Underwriters. Any such payment by the Representative shall
not relieve any such Underwriter or Underwriters of any of its or their
obligations hereunder.
4. OFFERING. The Underwriters are to make a public offering of the Firm
Stock as soon, on or after the date on which the Registration Statement becomes
effective under the Securities Act, as the Representative deems it advisable so
to do. The Firm Stock is to be initially offered to the public at the initial
public offering price as provided for in Section 3(a) (such price being
-20-
hereinafter referred to as the "public offering price"). After the initial
public offering, the Representative may from time to time increase or decrease
the public offering price, in the sole discretion of the Representative, by
reason of changes in general market conditions or otherwise.
5. COVENANTS.
(a) The Company covenants that it will:
(1) use its best efforts to cause at least two (2) persons to be
elected to the Company's Board of Directors who are deemed to be independent of
the Company's Management.
(2) use its best efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as possible and notify the
Representative and counsel to the Underwriters immediately, and confirm such
notice in writing, (i) when the Registration Statement and any post-effective
amendment thereto become effective under the Securities Act, (ii) of the receipt
of any comments from the Commission or the "blue sky" or securities authority of
any jurisdiction regarding the Registration Statement, any post-effective
amendment thereto, the Prospectus, or any amendment or supplement thereto,
(iii) of the filing with the Commission of any supplement to the Prospectus, and
(iv) of the receipt of any notification with respect to a Stop Order or the
initiation or threatening of any proceeding with respect to a Stop Order. The
Company will use its best efforts to prevent the issuance of any Stop Order and,
if any Stop Order is issued, to obtain the lifting thereof as promptly as
possible. If the Registration Statement has become or becomes effective under
the Securities Act with a form of prospectus omitting Rule 430A Information, or
filing of the Prospectus with the Commission is otherwise required under Rule
424(b) of the Regulations, the Company will file with the Commission the
Prospectus, properly
-21-
completed, pursuant to Rule 424(b) of the Regulations within the time period
prescribed and will provide evidence satisfactory to the Representative of such
timely filing.
(3) during the time when a prospectus relating to the Firm
Stock or the Additional Stock is required to be delivered hereunder or under the
Securities Act or the Regulations, comply with all requirements imposed upon it
by the Securities Act, as now existing and as hereafter amended, and by the
Regulations, as from time to time in force, so far as necessary to permit the
continuance of sales of, or dealings in, the Stock in accordance with the
provisions hereof and the Prospectus. If, at any time when a prospectus
relating to the Firm Stock or the Additional Stock is required to be delivered
hereunder or under the Securities Act or the Regulations, any event shall have
occurred as a result of which, in the reasonable opinion of counsel for the
Company or counsel for the Underwriters, the Registration Statement or the
Prospectus as then amended or supplemented contains any untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, or if, in the
opinion of either of such counsel, it is necessary at any time to amend or
supplement the Registration Statement or the Prospectus to comply with the
Securities Act or the Regulations, the Company will notify immediately the
Representative and promptly prepare and file with the Commission an appropriate
amendment or supplement (in form and substance satisfactory to the
Representative and counsel to the Underwriters) which will correct such
statement or omission or which will effect such compliance and will use its best
efforts to have any such amendment declared effective under the Securities Act
as soon as possible.
(4) deliver without charge to each of the several Underwriters
such number of copies of each Preliminary Prospectus as may reasonably be
requested by the
-22-
Underwriters and, as soon as the Registration Statement, or any amendment
thereto, becomes effective under the Securities Act or a supplement is filed
with the Commission, deliver without charge to the Representative two signed
copies of the Registration Statement, including exhibits, or such amendment
thereto, as the case may be, and two copies of any supplement thereto, and
deliver without charge to each of the several Underwriters such number of copies
of the Prospectus, the Registration Statement, and amendments and supplements
thereto, if any, without exhibits, as the Representative may request for the
purposes contemplated by the Securities Act.
(5) endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective under the Securities Act, to qualify the Securities for offering and
sale under the "blue sky" or securities laws of such jurisdictions as may be
designated by the Representative; PROVIDED, HOWEVER, that no such qualification
shall be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general process or to taxation as a foreign
corporation doing business in such jurisdiction to which it is not then subject.
In each jurisdiction where such qualification shall be effected, the Company
will, unless the Representative agrees in writing that such action is not at the
time necessary or advisable, file and make such statements or reports at such
times as are or may be required by the laws of such jurisdiction.
(6) make generally available, within the meaning of Section
11(a) of the Securities Act and the Regulations, to its security holders as soon
as practicable, but not later than ________________, an earnings statement,
which need not be certified by independent certified public accountants unless
required by the Securities Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Securities Act and the Regulations, covering
a
-23-
period of at least twelve (12) months beginning after the date on which the
Registration Statement was declared effective under the Securities Act.
(7) for the two-year (2) period commencing on the effective
date of the Registration Statement, the Company and all of its stockholders
owning at least five percent (5%) of the shares of the Company's Common Stock
either currently or immediately preceding the date of the offering, shall grant
the Representative the right of first refusal (on terms at least as favorable as
can be obtained from other sources) to act as lead manager, placement agent, or
investment banker with respect to any proposed underwritten public distribution
or private placement of the Company's securities or any merger, acquisition, or
disposition of assets of the Company, if the Company uses a lead manager,
placement agent or investment banker or person performing such functions for a
fee. The Representative will advise the Company promptly (but in no event later
than seven (7) days following the submission to the Representative in writing of
any such proposed transaction(s)) of its election to exercise said right. If
any such proposal is not accepted by the Representative, but later modified, the
Company will resubmit such proposal to the Representative. Should the
Representative elect, at any time, not to exercise said right, this will not
affect preferential rights for future finances.
(8) for a period of five (5) years after the date on which the
Registration Statement was declared effective under the Securities Act furnish
you, without charge, the following:
-24-
(i) within ninety (90) days after the end of each fiscal
year, one (1) copy of financial statements certified by independent certified
public accountants, including a balance sheet, statement of income, and
statement of changes in cash flows of the Company and its then existing
subsidiaries, if any, with supporting schedules, prepared in accordance with
generally accepted accounting principles, as at the end of such fiscal year and
for the twelve (12) months then ended, which may be on a consolidated basis;
(ii) as soon as practicable after they have been sent to
stockholders of the Company or filed with, or furnished to, the Commission or
the NASD, one (1) copy of each annual and interim financial and other report or
communication sent by the Company to its stockholders or filed with, or
furnished to, the Commission or the NASD;
(iii) as soon as practicable, one (1) copy of every press
release and every material news item and article in respect of the Company or
its affairs which was released by the Company; and
(iv) such additional documents and information with respect
to the Company and its affairs, as the Representative may from time to time
reasonably request; PROVIDED, HOWEVER, that such additional documents and
information shall be received by the Representative on a confidential basis,
unless otherwise disclosed to the public, and shall not be used in violation of
the federal securities laws and the rules and regulations promulgated
thereunder.
(9) apply the net proceeds received by the Company from the
offering contemplated by this Agreement in the manner set forth under the
heading "Use of Proceeds" in the Prospectus.
-25-
(10) furnish to the Representative as early as practicable prior
to the Closing Date and each Additional Closing Date, if any, as the case may
be, but not less than two (2) full business days prior thereto, a copy of the
latest available unaudited interim financial statements of the Company which
have been read by the Company's independent certified public accountants, as
stated in their letters to be furnished pursuant to Section 7(f) hereof.
(11) file no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the date on which
the Registration Statement was declared effective under the Securities Act,
unless such filing shall comply with the Securities Act and the Regulations and
unless the Representative shall previously have been advised of such filing and
furnished with a copy thereof, and the Representative shall have approved such
filing in writing. Until the later of (i) the completion by the Underwriters of
the distribution of the Stock (but in no event more than nine (9) months after
the date on which the Registration Statement shall have been declared effective
under the Securities Act) and (ii) twenty-five (25) days after the date on
which the Registration Statement shall have been declared effective under the
Securities Act, the Company will prepare and file with the Commission, promptly
upon the Representative's request, any amendments or supplements to the
Registration Statement or the Prospectus which, in the sole opinion of the
Representative, may be necessary or advisable in connection with the
distribution of the Stock.
(12) file timely with the Commission an appropriate form to
register the Common Stock, including the Stock, pursuant to Section 12(g) of the
Exchange Act and comply with all registration, filing, and reporting
requirements of the Exchange Act, which may from time to time be applicable to
the Company.
-26-
(13) comply with all provisions of all undertakings contained in
the Registration Statement.
(14) prior to the later of (A) five (5) years after which the
Registration Statement was declared effective under the Securities Act and (B)
any Additional Closing Date, issue no press release or other communication,
directly or indirectly, and hold no press conference with respect to the
Company, the financial condition, results of operations, business, properties,
assets, liabilities of any the Company or any Subsidiary, or this offering,
without the prior written consent of the Representative.
(15) make all filings required to maintain the inclusion of the
Common Stock on the Nasdaq National Market for a least four (4) years from the
date of this Agreement.
(16) on the Closing Date, sell to the Hampshire, individually
and not as Representative of the several Underwriters, at the price of $.001 per
warrant, the Representative's Warrants to purchase the Warrant Shares, which
such warrants shall be substantially in the form set forth as an exhibit to the
Registration Statement.
(17) until expiration of the Representative's Warrants, keep
reserved sufficient shares of Common Stock for issuance upon exercise of the
Representative's Warrants.
(18) deliver to the Representative, without charge, within a
reasonable period after the last Additional Closing Date or the expiration of
the period during which the Representative may exercise the Over-allotment
Option, five (5) sets of bound volumes of the Registration Statement and all
related materials to the individuals designated by the Representative or counsel
to the Underwriters.
-27-
(19) for a period of three years after the effective date on
which the Registration Statement is declared effective under the Securities Act,
provide, at its sole expense, to the Representative copies of the Company's
daily transfer sheets, if so requested by the Representative.
(20) maintain key-person life insurance payable to the Company
on the lives of each of Xx. Xxxxx Xxxxxxx, President and Chief Executive
Officer of the Company, and Xxxx Xxxxxxx, the Chairman of the Board of the
Company, in the amount of at least $1,000,000, for the period of time equal to
the longer of three (3) years from the date on which the Registration Statement
becomes effective under the Securities Act and the term of the employment
agreement between the Company and such officer.
(21) For a period of three (3) years from the date on which the
Registration Statement becomes effective under the Securities Act, the
Representative shall have the right to appoint a designee as an observer of the
Company's Board of Directors. Such observer will have the right to attend all
meetings of the Board of Directors. Such observer shall be entitled to receive
reimbursement for all out-of-pocket expenses incurred in attending such
meetings, at the standards applied to the Company's officers and directors,
including, but not limited to, food, lodging, transportation, and to the extent
any fees are paid to independent directors for attending meetings, such
attendance fees shall be paid by the Company to the observer. The
Representative shall be given notice of such meetings at the same time and in
the same manner as directors of the Company are informed. The Representative
and such observer shall be indemnified to the same extent as the other
directors. The Company will purchase Directors & Officers insurance in an
amount of not less than $2,000,000, PROVIDED, HOWEVER, that the Company shall
not
-28-
be required to pay more than $50,000 per year in order to maintain such
insurance, and if insurance in such amount is not available at such cost, the
Company shall purchase that amount of such insurance which is available at a
cost of $50,000 per year. The Company will use its best efforts to extend the
coverage of such insurance to the observer.
(22) not effect a change in its accounting firm for a period of
two (2) years from the effective date of the Registration Statement without the
prior written consent of the Representative, except no consent is required if
the new firm is a "big six" firm.
(23) retain the services of American Stock Transfer and Trust
Company as the Company's transfer agent for the Securities, which such
retainment shall not be changed without the prior written consent of the
Representative.
6. PAYMENT OF EXPENSES. The Company hereby agrees to pay all expenses
(other than fees of counsel for the Underwriters, except as provided in Section
6(c)) in connection with (a) the preparation, printing, filing, distribution,
and mailing of the Registration Statement and the Prospectus and the printing,
filing, distribution, and mailing of this Agreement and the Master Agreement
Among Underwriters, any Master Selected Dealer Agreement and related documents,
including the cost of all copies thereof and of the Preliminary Prospectuses and
of the Prospectus and any amendments or supplements thereto supplied to the
Underwriters in quantities as hereinabove stated; (b) the issuance, sale,
transfer, and delivery (as applicable) of the Securities, including any transfer
or other taxes payable thereon; (c) the qualification of the Securities under
state or foreign "blue sky" or securities laws, including the costs of printing
and mailing the preliminary and final "Blue Sky Survey" and the fees of counsel
for the Underwriters of $25,000 ($35,000 if Nasdaq National Market listing is
not obtained) plus disbursements in connection
-29-
therewith, payable as follows: (i) $10,000 of the fee upon the engagement by
Hampshire, (ii) $10,000 of the fee upon the filing of the Registration Statement
and (iii) the balance of the fee on the Closing Date; (d) the filing fees
payable to the Commission, the NASD, and the jurisdictions in which such
qualification is sought; (e) any fees relating to the listing of the Common
Stock on the Nasdaq National Market and any other stock market or exchange; (f)
the cost of printing certificates representing the shares of Common Stock; (g)
the fees of the transfer agent for the Common Stock, (h) the cost of publication
of "tombstone" advertisements with respect to offerings, not to exceed $25,000;
and (i) a non-accountable expense allowance equal to three percent (3%) of the
gross proceeds of the sale of the Firm Stock and the Additional Stock (less
amounts, if any, previously paid to the Representative by the Company in respect
of such non-accountable expense allowance) to the Representative on the Closing
Date. Notwithstanding the foregoing, if the offering contemplated hereby should
be terminated, the Company agrees to pay the Representative only the
out-of-pocket expenses incurred by the Underwriters in connection with this
Agreement or the proposed offer, sale, and delivery of the Securities.
7. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the
several Underwriters to purchase and pay for the Firm Stock and the Additional
Stock, as provided herein, and the obligation of Hampshire to purchase and pay
for the Representative's Warrants, each as provided herein, shall be subject,
in the discretion of the Representative, to the continuing accuracy of the
representations and warranties of the Company contained herein and in each
certificate and document contemplated under this Agreement to be delivered to
the Underwriters, as of the date hereof and as of the Closing Date (or any
Additional Closing Date, as the case may
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be), to the performance by the Company of its obligations hereunder, and to the
following conditions:
(a) The Registration Statement shall have become effective under the
Securities Act not later than 6:00 P.M., New York City local time, on the date
of this Agreement or such later date and time as shall be consented to in
writing by the Representative; on or prior to the Closing Date, or any
Additional Closing Date, as the case may be, no Stop Order shall have been
issued and no proceeding shall have been initiated or threatened with respect to
a Stop Order; and any request by the Commission for additional information shall
have been complied with by the Company to the reasonable satisfaction of counsel
for the Underwriters. If required, the Prospectus shall have been filed with
the Commission in the manner and within the time period required by Rule 424(b)
under the Securities Act.
(b) (1) At the Closing Date and any Additional Closing Date, as the
case may be, the Underwriters shall have received the opinion of Crummy, Del
Deo, Dolan, Griffinger & Xxxxxxxxx, P.C., counsel for the Company, dated the
date of delivery, addressed to the Underwriters, and in form and scope
satisfactory to counsel for the Underwriters, with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(i) the Company is a corporation duly organized, validly
existing, and in good standing under the laws of its jurisdiction of
incorporation, with full power and authority, and all necessary consents,
authorizations, approvals, orders, licenses, certificates, and permits of and
from, and declarations and filings with, all federal, state, local, and other
governmental authorities and all courts and other tribunals, to own, lease,
license, and use its properties and assets and to conduct its business in the
manner described in the Prospectus. The
-31-
Company is duly qualified to do business as a foreign corporation and is in good
standing as such in every jurisdiction in which its ownership, leasing,
licensing, or use of property and assets or the conduct of its business makes
such qualification necessary;
(ii) the authorized capital stock of the Company consists of
(i) 10,000,000 shares of Common Stock, of which 3,500,000 shares are
outstanding, (ii) 1,000,000 shares of Preferred Stock, par value $.01 per share,
none of which is outstanding, and (iii) 118,100 shares of Series A Cumulative
Redeemable Preferred Stock, of which 118,100 is outstanding. Except as
otherwise disclosed in the Prospectus, each outstanding share of capital stock
of the Company is free and clear of all liens, security interests, pledges,
charges, encumbrances, stockholders' agreements, and voting trusts. Except as
disclosed in the Prospectus, each outstanding share of Common Stock is validly
authorized and issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, has not been issued and is not
owned or held in violation of any preemptive or similar rights of stockholders.
To the knowledge of such counsel, there is no commitment, plan, or arrangement
to issue, and no outstanding option, warrant, or other right calling for the
issuance of, any share of capital stock of the Company or any security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company except as may be properly
described in the Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company. The certificates evidencing the
Common Stock are in due and proper form;
(iii) to the knowledge of such counsel, there is no
litigation, arbitration, claim, governmental or other proceeding (formal or
informal), or investigation pending,
-32-
threatened, or in prospect (or any basis therefor) with respect to the Company
or any of its operations, businesses, properties, or assets, except as may be
properly described in the Prospectus or such as individually or in the aggregate
do not now have, and will not in the future have, a material adverse effect upon
the operations, business, properties, or assets of the Company. To the
knowledge of such counsel, the Company is not in violation of, or in default
with respect to, any law, rule, regulation, order, judgment, or decree, except
as may be properly described in the Prospectus or such as in the aggregate do
not now have and will not in the future have a material adverse effect upon the
operations, business, properties, or assets of the Company; nor is the Company
required to take any action in order to avoid any such violation or default;
(iv) to the knowledge of such counsel, neither the Company
nor any other party is now, or is expected by the Company to be, in violation or
breach of, or in default with respect to, any provision of any contract,
agreement, instrument, lease, license, arrangement, or understanding which is
material to the Company, and, to the knowledge of such counsel, each such
contract, agreement, instrument, lease, license, arrangement, or understanding
is in full force and effect and is the valid, legal, and binding obligation of
the parties thereto and is enforceable in accordance with its terms;
(v) the Company is not in violation or breach of, or in
default with respect to, any term of its respective certificate of incorporation
(or other charter document) or by-laws;
(vi) the Company has all requisite power and authority to
execute, deliver, and perform this Agreement and the Representative's Warrants.
All necessary corporate proceedings of the Company have been taken to authorize
the execution, delivery, and performance
-33-
by the Company of this Agreement and the Representative's Warrants. This
Agreement has been duly authorized, executed, and delivered by the Company, is
the legal, valid, and binding obligation of the Company, and, subject to
applicable bankruptcy, insolvency, and other laws affecting the enforceability
of creditors' rights generally, is enforceable as to the Company in accordance
with its terms. The Representative's Warrants have been duly authorized by the
Company and, when executed and delivered by the Company, will be legal, valid,
and binding obligations of the Company, each enforceable as to the Company in
accordance with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by the Company for the execution, delivery, or performance by the
Company of this Agreement or the Representative's Warrants, except filings
under the Securities Act which have been made prior to the Closing Date or
Additional Closing Date, as the case may be, and consents consisting only of
consents under "blue sky" or securities laws, which have been obtained. No
consent of any party to any contract, agreement, instrument, lease, license,
arrangement, or understanding known to such counsel to which the Company is a
party, or to which any of its properties or assets are subject, is required for
the execution, delivery, or performance of this Agreement and the
Representative's Warrants; and the execution, delivery, and performance of this
Agreement and the Representative's Warrants will not violate, result in a
breach of, conflict with, result in the creation or imposition of any lien,
charge, or encumbrance upon any properties or assets of the Company pursuant to
the terms of, or, with or without the giving of notice or the passage of time or
both, entitle any party to terminate or call a default under, any such contract,
agreement, instrument, lease, license, arrangement, or understanding known to
such counsel, violate
-34-
or result in a breach of, or conflict with any term of the certificate of
incorporation (or other charter document) or by-laws of the Company, or violate,
result in a breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on the Company to which any of its operations,
businesses, properties, or assets are subject;
(vii) each share of Firm Stock to be delivered on the
Closing Date is validly authorized and, when issued and delivered in accordance
with the terms hereof, will be validly issued, fully paid, and nonassessable,
without any personal liability attaching to the ownership thereof, and will not
be issued in violation of any preemptive or similar rights of stockholders.
Each share of Additional Stock to be delivered on the Closing Date or any
Additional Closing Date, as applicable, is validly authorized and, when issued
and delivered in accordance with the terms hereof, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and will not issued in violation of any preemptive or similar
rights of stockholders. The Underwriters will receive good title to the shares
of Firm Stock and Additional Stock purchased by them, respectively, free and
clear of all liens, security interests, pledges, charges, encumbrances,
stockholders' agreements, and voting trusts. The Additional Stock has been
duly and validly reserved for issuance. The Stock conforms to all statements
relating thereto contained in the Registration Statement or the Prospectus;
(viii) the Warrant Shares are validly authorized and has
been duly and validly reserved for issuance pursuant to the terms of the
Representative's Warrants. The Representative's Warrants have been duly and
validly issued and delivered. The Warrant Shares, when issued and delivered in
accordance with the Representative's Warrants, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
-35-
ownership thereof, and will not have been issued in violation of any preemptive
rights of stockholders. The Representative, and any other holders of the
Representative's Warrants, will receive good title to the securities purchased
by them upon exercise of the Representative's Warrants, free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. The Representative's Securities conform to all
statements relating thereto contained in the Registration Statement or the
Prospectus;
(ix) to the knowledge of such counsel, each contract,
agreement, instrument, lease, or license required to be described in the
Registration Statement or the Prospectus has been properly described therein,
and each contract, agreement, instrument, lease, or license required to be filed
as an exhibit to the Registration Statement has been filed with the Commission
as an exhibit to the Registration Statement;
(x) insofar as statements in the Prospectus purport to
summarize the status of litigation or the provisions of laws, rules,
regulations, orders, judgments, decrees, contracts, agreements, instruments,
leases, or licenses, such statements have been prepared or reviewed by such
counsel and accurately reflect the status of such litigation and provisions
purported to be summarized and are correct in all respects;
(xi) the Company is not an "investment company" as defined
in the Investment Company Act and the rules and regulations thereunder and, if
the Company conducts its business as set forth in the Prospectus, will not
become an "investment company", and will not be required to be registered under
the Investment Company Act;
(xii) to the knowledge of such counsel, no person or entity
has the right to require registration of shares of Common Stock or other
securities of the Company because
-36-
of the filing or effectiveness of the Registration Statement, except by entities
which have waived such rights as described in the Registration Statement and the
Prospectus;
(xiii) there is no stamp duty, value-added tax or any
similar tax or duty, payable by or on behalf of the Underwriters or the Company
in Hong Kong in connection with the authorization, issuance, sale and delivery
of the Securities to the Underwriters in the manner contemplated by this
Agreement; and
(xiv) the Registration Statement has become effective under
the Securities Act, the Prospectus has been filed in accordance with Rule 424(b)
of the Regulations, including the applicable time periods set forth therein, or
such filing is not required. To the knowledge of such counsel, no Stop Order
has been issued and no proceeding for that purpose has been instituted or
threatened. On the basis of the participation of such counsel in conferences at
which the contents of the Registration Statement and the Prospectus and related
matters were discussed, but without independent verification by such counsel of
the accuracy, completeness, or fairness of the statements contained in the
Registration Statement, the Prospectus, or any amendment or supplement thereto,
such counsel have no knowledge that (other than financial statements and other
financial data and schedules which are or should be contained therein, as to
which such counsel need express no opinion): (A) the Registration Statement, any
Rule 430A Prospectus, and the Prospectus, and any amendment or supplement
thereto, does not appear on its face to comply as to form in all material
respects with the requirements of the Securities Act and the Regulations;
(B) any of the Registration Statement, any Rule 430A Prospectus, or the
Prospectus, or any amendment or supplement thereto, contains any untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the
-37-
statements therein not misleading; or (C) since the date of effectiveness under
the Securities Act of the Registration Statement, any event has occurred which
should have been set forth in an amendment or supplement to the Registration
Statement or the Prospectus which has not been set forth in such an amendment or
supplement.
In rendering such opinion, counsel for the Company may rely (A) as to
matters involving the application of laws other than the laws of the United
States and the laws of the State of Delaware, to the extent counsel for the
Company deems proper and to the extent specified in such opinion, upon an
opinion or opinions (in form and substance satisfactory to counsel for the
Underwriters) of other counsel, acceptable to counsel for the Underwriters,
familiar with the applicable laws, in which case the opinion of counsel for the
Company shall state that the opinion or opinions of such other counsel are
satisfactory in scope, form, and substance to counsel for the Company and that
reliance thereon by counsel for the Company and the Underwriters is reasonable;
(B) as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company; and (C) to the extent they deem proper,
upon written statements or certificates of officers of departments of various
jurisdictions having custody of documents respecting the corporate existence or
good standing of the Company; provided that copies of any such opinions,
certificates, or statements shall be annexed as exhibits to the opinion of
counsel for the Company.
(c) On or prior to the Closing Date and any Additional Closing Date,
as the case may be, the Underwriters shall have been furnished such information,
documents, certificates, and opinions as they may reasonably require for the
purpose of enabling them to review the matters referred to in Section 7(b), and
in order to evidence the accuracy, completeness, or satisfaction of
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any of the representations, warranties, covenants, agreements, or conditions
herein contained, or as the Representative may reasonably request.
(d) At the Closing Date or any Additional Closing Date, as the case
may be, (i) the Registration Statement and the Prospectus and any amendments or
supplements thereto shall contain all statements which are required to be stated
therein in accordance with the Securities Act and the Regulations, and in all
material respects conform to the requirements thereof, and neither the
Registration Statement nor the Prospectus nor any amendment or supplement
thereto shall contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, (ii) there shall have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, no material adverse change, or any development involving a
prospective material adverse change, in the business, properties, or condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt, or general affairs of the Company from that set forth in the
Registration Statement and the Prospectus, except changes which the Registration
Statement and Prospectus indicate might occur after the date on which the
Registration Statement becomes effective under the Securities Act, and the
Company shall not have incurred any material liabilities or entered into any
agreements not in the ordinary course of business other than as referred to in
the Registration Statement and Prospectus, (iii) except as set forth in the
Prospectus, no litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation shall be pending, threatened, or in
prospect (or any basis therefor) with respect to the Company or any of its
operations, businesses, properties, or assets which would be required to be set
forth in the Registration Statement, wherein an unfavorable decision, ruling, or
finding would
-39-
materially adversely affect the business, property, condition (financial or
otherwise), results of operations, or general affairs of the Company and (iv)
the Stock be quoted upon the Nasdaq National Market.
(e) At the Closing Date and any Additional Closing Date, as the case
may be, the Representative shall have received a certificate of the chief
executive officer, the chief financial officer, and the chief accounting officer
of the Company, dated the Closing Date or such Additional Closing Date, as the
case may be, to the effect, among other things, that (i) the conditions set
forth in Sections 7(a) and 7(d) have been satisfied, (ii) as of the date of this
Agreement and as of the Closing Date or such Additional Closing Date, as the
case may be, the representations and warranties of the Company contained herein
were and are accurate and correct in all materials respects, and (iii) as of the
Closing Date or such Additional Closing Date, as the case may be, the
obligations to be performed by the Company hereunder on or prior to such time
have been fully performed.
(f) At the time this Agreement is executed and at the Closing Date
and any Additional Closing Date, as the case may be, the Representative shall
have received a letter, addressed to the Underwriters, and in form and substance
satisfactory to the Representative, with reproduced copies or signed
counterparts thereof for each of the Underwriters, from Xxxxxxx X. Xxxxxx &
Company, LLP, independent certified public accountants for the Company, dated
the date of delivery:
(i) confirming that they are, and during the period covered by
their report(s) included in the Registration Statement and the Prospectus were,
independent certified public accountants with respect to the Company within the
meaning of the Securities Act and the
-40-
published Regulations and stating that the answer to Items 10 and 13 of the
Registration Statement is correct insofar as it relates to them;
(ii) stating that, in their opinion, the financial statements and
schedules of the Company included in the Registration Statement examined by them
comply in form in all material respects with the applicable accounting
requirements of the Securities Act and the related published rules and
regulations;
(iii) stating that, on the basis of procedures (but not an
examination made in accordance with generally accepted auditing standards)
consisting of a reading of the latest available unaudited interim financial
statements of the Company (with an indication of the date of the latest
available unaudited interim financial statements), a reading of the latest
available minutes of the stockholders and Boards of Directors of the Company and
committees of such Board of Directors, inquiries to certain officers and other
employees of the Company responsible for financial and accounting matters, and
other specified procedures and inquiries, nothing has come to their attention
that caused them to believe that: (A) the unaudited financial statements and
schedules of the Company included in the Registration Statement and Prospectus
do not comply in form in all material respects with the applicable accounting
requirements of the Securities Act and the Exchange Act and the related
published rules and regulations under the Securities Act or the Exchange Act or
are not fairly presented in conformity with generally accepted accounting
principles (except to the extent that certain footnote disclosures regarding any
stub period may have been omitted in accordance with the applicable rules of the
Commission under the Exchange Act) applied on a basis consistent with that of
the audited financial statements appearing therein; (B) there was any change in
the capital stock or long-term debt of the Company or any decrease in the
-41-
net current assets or stockholders' equity of the Company as of the date of the
latest available monthly financial statements of the Company as of a specified
date not more than five (5) business days prior to the date of such letter, each
as compared with the amounts shown in the September 30, 1997 and March 31,
1997 balance sheets included in the Registration Statement and Prospectus, other
than as properly described in the Registration Statement and Prospectus or any
change or decrease (which shall be set forth therein) which, in the sole
discretion of the Representative, the Representative shall accept, or (C) there
was any decrease in net sales, net earnings, or net earnings per share of Common
Stock during the period from September 30, 1997 and March 31, 1997 and to
the date of the latest available monthly financial statements of the Company or
to a specified date not more than five (5) business days prior to the date of
such letter, each as compared with the corresponding period in 1997, other than
as properly described in the Registration Statement and Prospectus or any
decrease (which shall be set forth therein) which, the sole discretion of the
Representative, the Representative shall accept; and
(iv) stating that they have compared specific numerical data and
financial information pertaining to the Company set forth in the Registration
Statement, which have been specified by the Representative prior to the date of
this Agreement, to the extent that such data and information may be derived from
the general accounting records of the Company, and excluding any questions
requiring an interpretation by legal counsel, with the results obtained from the
application of specified readings, inquiries, and other appropriate procedures
(which procedures do not constitute an examination in accordance with generally
accepted auditing standards) set forth in the letter, and found them to be in
agreement.
-42-
(g) All proceedings taken in connection with the issuance, sale,
transfer, and delivery of the Securities shall be satisfactory in form and
substance to the Representative and to counsel for the Underwriters, and the
Underwriters shall have received from such counsel for the Underwriters the
opinion, dated as of the Closing Date and the Additional Closing Date, as the
case may be, with respect to such of the matters set forth under Section 7(b),
and with respect to such other related matters, as the Representative may
reasonably request.
(h) The NASD, upon review of the terms of the public offering of the
Stock shall not have objected to the Underwriters' participation in such
offering.
(i) Prior to or on the Closing Date, the Company shall have entered
into the Representative's Warrants with the Representative.
(j) Prior to or on the Closing Date, the Company shall have provided
to the Representative copies of the agreements referred to in Section 2(a)(18).
Any certificate or other document signed by any officer of the Company and
delivered to the Representative or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company hereunder to the
Underwriters as to the statements made therein. If any condition to the
Underwriters' obligations hereunder to be fulfilled prior to or at the Closing
Date or any Additional Closing Date, as the case may be, is not so fulfilled,
the Representative may, on behalf of the several Underwriters, terminate this
Agreement or, if the Representative so elects, in writing waive any such
conditions which have not been fulfilled or extend the time for their
fulfillment.
8. INDEMNIFICATION AND CONTRIBUTION.
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(a) Subject to the conditions set forth below, the Company agrees to
indemnify and hold harmless each Underwriter, its officers, directors, partners,
employees, agents, counsel and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the Securities Act or Section
20(a) of the Exchange Act, against any and all loss, liability, claim, damage,
and expense whatsoever (which shall include, for all purposes of this Section 8,
but not be limited to, attorneys' fees and any and all expense whatsoever
incurred in investigating, preparing, or defending against any litigation,
commenced or threatened, or any claim whatsoever and any and all amounts paid in
settlement of any claim or litigation) as and when incurred arising out of,
based upon, or in connection with, (i) any untrue statement or alleged untrue
statement of a material fact contained in (A) the Registration Statement, any
Preliminary Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto or (B) any application or
other document or communication (for purposes of this Section 8, collectively
referred to as an "application") executed by, or on behalf of, the Company or
based upon written information furnished by, or on behalf of, the Company filed
in any jurisdiction in order to qualify the Securities under the "blue sky" or
securities laws thereof or filed with the Commission or any securities exchange;
or any omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
unless such statement or omission was made in reliance upon, and in conformity
with, written information furnished to the Company as stated in Section 8(b)
with respect to any Underwriter by, or on behalf of such Underwriter through the
Representative , expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or in any application, as the case may be, or (ii) any breach of any
representation, warranty,
-44-
covenant, or agreement of the Company contained in this Agreement. The
foregoing agreement to indemnify shall be in addition to any liability the
Company may otherwise have, including liabilities arising under this Agreement.
If any action is brought against an Underwriter or any of its respective
officers, directors, partners, employees, agents, counsel or any controlling
persons of an Underwriter (an "indemnified party") in respect of which indemnity
may be sought against the Company pursuant to the foregoing paragraph, such
indemnified party or parties shall promptly notify the Company in writing of the
institution of such action (but the failure so to notify shall not relieve the
Company from any liability it may have other than pursuant to this Section 8(a))
and the Company shall promptly assume the defense of such action, including,
without limitation, the employment of counsel satisfactory to such indemnified
party or parties and payment of expenses. Such indemnified party or parties
shall have the right to employ its or their own counsel in any such case, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless the employment of such counsel shall have
been authorized in writing by the Company in connection with the defense of such
action or the Company shall not have promptly employed counsel satisfactory to
such indemnified party or parties to have charge of the defense of such action
or such indemnified party or parties shall have concluded that there may be one
or more legal defenses available to it or them or to other indemnified parties
which are different from, or in addition to, those available to the Company, in
any of which events such fees and expenses shall be borne by the Company, and
the Company shall not have the right to direct the defense of such action on
behalf of the indemnified party or parties. Anything in this paragraph to the
contrary notwithstanding, the Company shall not be liable for any settlement of
any such claim or action
-45-
effected without its written consent, which consent shall not be unreasonably
withheld. The Company shall not, without the prior written consent of each
indemnified party that is not released as described in this sentence, settle or
compromise any action, or permit a default or consent to the entry of judgment
or otherwise seek to terminate any pending or threatened action, in respect of
which indemnity may be sought hereunder (whether or not any indemnified party is
a party thereto), unless such settlement, compromise, consent, or termination
includes an unconditional release of each indemnified party from all liability
in respect of such action. The Company agrees promptly to notify the
Underwriters of the commencement of any litigation or proceedings against the
Company or any of its officers or directors in connection with the sale of the
Securities, the Registration Statement, any Preliminary Prospectus, or the
Prospectus, or any amendment or supplement thereto, or any application.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, each director of the Company, each officer of the Company who
shall have signed the Registration Statement, and each other person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act or
Section 20(a) of the Exchange Act, to the same extent as the foregoing indemnity
from the Company to the several Underwriters in Section 8(a), but only with
respect to statements or omissions, if any, made in the Registration Statement,
any Preliminary Prospectus, or the Prospectus (as from time to time amended and
supplemented), or any amendment or supplement thereto, or in any application, in
reliance upon, and in conformity with, written information furnished to the
Company as stated in this Section 8(b) with respect to any Underwriter by, or on
behalf of, such Underwriter through the Representative expressly for inclusion
in the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any
-46-
amendment or supplement thereto, or on any application, as the case may be;
PROVIDED, HOWEVER, that the obligation of each Underwriter to provide indemnity
under the provisions of this Section 8(b) shall be limited to the amount which
represents the product of (i) the number of shares of Stock underwritten by such
Underwriter hereunder and the (ii) the underwriting discount per share of Common
Stock set forth on the cover page of the Prospectus. For all purposes of this
Agreement, the amounts of the selling concession and reallowance and the name of
each of the Underwriters, and the number of shares of Firm Stock purchased by
each of the Underwriters set forth in the Prospectus constitute the only
information furnished in writing by, or on behalf of, such Underwriter expressly
for inclusion in the Registration Statement, any Preliminary Prospectus, or the
Prospectus (as from time to time amended or supplemented), or any amendment or
supplement thereto, or in any application, as the case may be. If any action
shall be brought against the Company or any other person so indemnified based on
the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto, or in any application, and in respect of
which indemnity may be sought against any Underwriter pursuant to this Section
8(b), such Underwriter shall have the rights and duties given to the Company,
and the Company and each other person so indemnified shall have the rights and
duties given to the indemnified parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if (i) an
indemnified party makes a claim for indemnification pursuant to Sections 8(a)
and 8(b) (subject to the limitations thereof) but it is found in a final
judicial determination, not subject to further appeal, that such indemnification
may not be enforced in such case, even though this Agreement expressly provides
for indemnification in such case or (ii) any indemnified or indemnifying party
seeks contribution
-47-
under the Securities Act, the Exchange Act, or otherwise, then the Company
(including for this purpose any contribution made by, or on behalf of, any
director of the Company, any officer of the Company who signed the Registration
Statement, and any controlling person of the Company), as one entity, and the
Underwriters (including for this purpose any contribution by, or on behalf of,
an indemnified party) as a second entity, shall contribute to the losses,
liabilities, claims, damages, and expenses whatsoever to which either one of
them may be subject, so that the Underwriters, in the aggregate, are responsible
for the proportion thereof equal to the percentage which the underwriting
discount per share of Common Stock set forth on the cover page of the Prospectus
represents of the initial public offering price per share of Common Stock set
forth on the cover page of the Prospectus and the Company is responsible for
the remaining portion; PROVIDED, HOWEVER, that if applicable law does not permit
such allocation, then other relevant equitable considerations such as the
relative fault of the Company and the Underwriters in connection with the facts
which resulted in such losses, liabilities, claims, damages, and expenses shall
also be considered. The relative fault, in the case of an untrue statement,
alleged untrue statement, omission, or alleged omission, shall be determined by,
among other things, whether such statement, alleged statement, omission, or
alleged omission relates to information supplied by the Company or by the
Underwriters, and the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent such statement, alleged
statement, omission, or alleged omission. The Company and the Underwriters
agree that it would be unjust and inequitable if the respective obligations of
the Company and the Underwriters for contribution were determined by pro rata or
per capita allocation of the aggregate losses, liabilities, claims, damages, and
expenses (even if the Underwriters and the other indemnified parties were
treated as
-48-
one entity for such purpose) or by any other method of allocation that does not
reflect the equitable considerations referred to in this Section 8(c). No
person guilty of a fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who is not guilty of such fraudulent misrepresentation. For purposes of this
Section 8(c), each person, if any, who controls any Underwriter within the
meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act
and each officer, director, partner, employee, agent, and counsel of any
Underwriter shall have the same rights to contribution as such Underwriter and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20(a) of the Exchange Act, each officer of the
Company who shall have signed the Registration Statement and each director of
the Company shall have the same rights to contribution as the Company, subject
in each case to the provisions of this Section 8(c). Anything in this Section
8(c) to the contrary notwithstanding, no party shall be liable for contribution
with respect to the settlement of any claim or action effected without its
written consent. This Section 8(c) is intended to supersede any right to
contribution under the Securities Act, the Exchange Act, or otherwise.
9. DEFAULT BY AN UNDERWRITER.
(a) If any Underwriter or Underwriters shall default in its or their
obligation to purchase Firm Stock or Additional Stock hereunder, and if the
number of shares of Firm Stock or Additional Stock to which the defaults of all
Underwriters in the aggregate relate does not exceed 10% of the number of shares
of Firm Stock or Additional Stock, as the case may be, which all Underwriters
have agreed to purchase hereunder, then such shares of Firm Stock or Additional
-49-
Stock to which such defaults relate shall be purchased by the non-defaulting
Underwriters in proportion to their respective commitments hereunder.
(b) If such defaults exceed in the aggregate 10% of the number of
shares of Firm Stock or Additional Stock, as the case may be, which all
Underwriters have agreed to purchase hereunder, the Representative may, in its
discretion, arrange to purchase itself or for another party or parties to
purchase such shares of Firm Stock or Additional Stock, as the case may be, to
which such default relates on the terms contained herein. If the Representative
does not arrange for the purchase of such shares of Firm Stock or Additional
Stock, as the case may be, within one (1) business day after the occurrence of
defaults relating to in excess of 10% of the Firm Stock or the Additional Stock,
as the case may be, then the Company shall be entitled to a further period of
one (1) business day within which to procure another party or parties
satisfactory to the Representative to purchase such shares of Firm Stock or
Additional Stock, as the case may be, on such terms. If the Representative or
the Company does not arrange for the purchase of the shares of Firm Stock or
Additional Stock, as the case may be, to which such defaults relate as provided
in this Section 9(b), this Agreement may be terminated by the Representative or
by the Company or the Representative , in each case without liability on the
part of the Company (except that the provisions of Sections 5(a)(1), 6, 8, 10,
and 13 shall survive such termination) or the several Underwriters, but nothing
in this Agreement shall relieve a defaulting Underwriter of its liability, if
any, to the other several Underwriters and to the Company for any damages
occasioned by its default hereunder.
(c) If the shares of Firm Stock or Additional Stock to which such
defaults relate are to be purchased by the non-defaulting Underwriters, or are
to be purchased by another party or
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parties as aforesaid, the Representative or the Company or the Representative
shall have the right to postpone the Closing Date or the Additional Closing
Date, as the case may be, for a reasonable period but not in any event more than
seven (7) business days in order to effect whatever changes may thereby be made
necessary in the Registration Statement or the Prospectus or in any other
documents and arrangements with respect to the Firm Stock or the Additional
Stock, and the Company agrees to prepare and file promptly any amendment or
supplement to the Registration Statement or the Prospectus which in the opinion
of counsel for the Underwriters may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any party substituted
under this Section 9 as if such party had originally been a party to this
Agreement and had been allocated the number of shares of Firm Stock and
Additional Stock actually purchased by it as a result of its original commitment
to purchase Firm Stock and Additional Stock and its purchase of shares of Firm
Stock or Additional Stock pursuant to this Section 9.
10. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters, and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of any
investigation made by, or on behalf of any Underwriter or any indemnified
person, or by, or on behalf of, the Company or any person or entity which is
entitled to be indemnified under Section 8(b), and shall survive termination of
this Agreement or the delivery of the Firm Stock and the Additional Stock, if
any, to the several Underwriters. In addition, the provisions of Sections
5(a)(1), 6, 8, 10, 11, and 13
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shall survive termination of this Agreement, whether such termination occurs
before or after the Closing Date or any Additional Closing Date.
Notwithstanding anything in the second sentence of Section 6 hereof to the
contrary, and in addition to the obligations assumed by the Company pursuant to
the first sentence of Section 6 hereof, if the offering should be terminated,
the Company shall be liable to the Underwriters only for out-of-pocket expenses
incurred by the Underwriters in connection with this Agreement or the proposed,
offer, sale, and delivery of the Securities.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION THEREOF.
(a) This Agreement shall become effective at 9:30 a.m., New York
City local time, on the first (1st) full business day following the day on which
the Registration Statement becomes effective under the Securities Act or at the
Time of the initial public offering by the Underwriters of the Firm Stock,
whichever is earlier. The "Time" of the initial public offering shall mean the
time, after the Registration Statement becomes effective under the Securities
Act, of the release by the Representative for publication of the first newspaper
advertisement which is subsequently published relating to the Firm Stock or the
time, after the Registration Statement becomes effective under the Securities
Act, when the Firm Stock is first released by the Representative for offering by
the Underwriters or dealers by letter or telegram, whichever shall first occur.
The Representative or the Company may prevent this Agreement from becoming
effective without liability of any party to any other party, except as noted
below in this Section 11, by giving the notice indicated in Section 11(d) before
the time this Agreement becomes effective under the Securities Act.
(b) If the purchase price of the Firm Stock has not been determined
as provided for in Section 3 prior to 4:30 p.m., New York City local time, on
the fifth (5th) full business day
-52-
after the date on which the Registration Statement becomes was declared
effective under the Securities Act, this Agreement may be terminated at any time
thereafter either by the Representative or by the Company by giving notice to
the other unless before such termination the purchase price for the Firm Stock
has been so determined. If the purchase price of the Firm Stock has not been so
determined prior to 4:30 p.m., New York City local time, on the tenth (10th)
full business day after the date on which the Registration Statement was
declared effective under the Securities Act, this Agreement shall automatically
terminate forthwith.
(c) In addition to the right to terminate this Agreement pursuant to
Sections 7 and 9 hereof, the Representative shall have the right to terminate
this Agreement at any time prior to the Closing Date or any Additional Closing
Date, as the case may be, by giving notice to the Company, and, if exercised,
the Over-allotment Option, at any time prior to any Additional Closing Date (i)
if any domestic or international event, act, or occurrence has materially and
adversely disrupted, or, in the opinion of the Representative, will in the
immediate future materially and adversely disrupt, the securities markets; or
(ii) if there shall have been a general suspension of, or a general limitation
on prices for, trading in securities on the New York Stock Exchange or the
American Stock Exchange or in the over-the-counter market; or (iii) if there
shall have been an outbreak or increase in the level of major hostilities or
other national or international calamity; or (iv) if a banking moratorium has
been declared by a state or federal authority; or (v) if a moratorium in foreign
exchange trading by major international banks or persons has been declared; or
(vi) if there shall have been a material interruption in the mail service or
other means of communication within the United States; or (vii) if the Company
shall have sustained a material or substantial loss by fire, flood, accident,
hurricane, earthquake, theft, sabotage, or other calamity or malicious act,
-53-
whether or not such loss shall have been insured, or from any labor dispute or
court or government action, order, or decree, which will, in the opinion of the
Representative, make it inadvisable to proceed with the offering, sale, or
delivery of the Firm Stock or the Additional Stock, as the case may be; or
(viii) if any material governmental restrictions shall have been imposed on
trading in securities in general, which restrictions are not in effect on the
date hereof; or (ix) if there shall be passed by the Congress of the United
States or by any state legislature any act or measure, or adopted by any
governmental body or authoritative accounting institute or board, or any
governmental executive, any orders, rules, or regulations, which the
Representative believes likely to have a material adverse effect on the
business, financial condition, or financial statements of the Company or the
market for the Common Stock; or (x) if there shall have been such material and
adverse change in the market for the Company's securities or securities in
general or in political, financial, or economic conditions as in the judgment of
the Representative makes it inadvisable to proceed with the offering, sale, and
delivery of the Firm Stock or the Additional Stock, as the case may be, on the
terms contemplated by the Prospectus.
(d) If the Representative elects to prevent this Agreement from
becoming effective, as provided in this Section 11, or to terminate this
Agreement pursuant to Section 7 of this Agreement or this Section 10, the
Representative shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects to
prevent this Agreement from becoming effective or to terminate this Agreement,
the Company shall notify the Representative promptly by telephone, telex, or
telegram, confirmed by letter.
(e) Anything in this Agreement to the contrary notwithstanding other
than Section 11(f), if this Agreement shall not become effective by reason of an
election pursuant to this
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Section 11 or if this Agreement shall terminate or shall otherwise not be
carried out within the time specified herein by reason of any failure on the
part of the Company to perform any covenant or agreement or satisfy any
condition of this Agreement by it to be performed or satisfied, the sole
liability of the Company to the several Underwriters, in addition to the
obligations the Company assumed pursuant to the first sentence of Section 6,
will be to reimburse the several Underwriters for such out-of-pocket expenses
(including the fees and disbursements of their counsel) as shall have been
incurred by them in connection with this Agreement or the proposed offer, sale,
and delivery of the Securities, and, upon demand, the Company agrees to pay
promptly the full amount thereof to the Representative for the respective
accounts of the Underwriters. Anything in this Agreement to the contrary
notwithstanding other than Section 11(f), if this Agreement shall not be carried
out within the time specified herein for any reason other than the failure on
the part of the Company to perform any covenant or agreement or satisfy any
condition of this Agreement by it to be performed or satisfied, the Company
shall have no liability to the several Underwriters other than for obligations
assumed by the Company pursuant to Section 6.
(f) Notwithstanding any election hereunder or any termination of this
Agreement, and whether or not this Agreement is otherwise carried out, the
provisions of Sections 5(a)(1), 6, 8, 10, and 13 shall not be in any way
affected by such election or termination or failure to carry out the terms of
this Agreement or any part hereof. Notwithstanding anything in the second
sentence of Section 6 hereof to the contrary, and in addition to the obligations
assumed by the Company pursuant to the first sentence of Section 6 hereof, if
the offering should be terminated, the Company shall be liable to the several
Underwriters only for out-of-pocket expenses incurred
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by the several Underwriters in connection with this Agreement or the proposed,
offer, sale, and delivery of the Securities.
12. NOTICES. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to such Underwriter, c/o Hampshire Securities Corporation, 000 Xxxxx
Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xx. Xxxxxxx X. Xxxx,
Managing Director, with a copy to Xxxxxxxx Xxxxx Singer & Xxxxxxxxx, LLP, 000
Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, Attention: Xxxxxx X. Xxxxx, Esq.; or
if sent to the Company , shall be mailed, delivered, or telexed or telegraphed
and confirmed by letter, to the Company, Ambassador Eyewear Group, Inc., 0000
Xxxxxxxx Xxxx, Xxxxxxxx, Xxxxxxxxxxxx 00000, Attention: Xxxxx Xxxxxxx,
President, with a copy to Crummy, Del Deo, Dolan, Griffinger & Xxxxxxxxx, P.C.,
Xxx Xxxxxxxxxx Xxxxx, Xxxxxx, Xxx Xxxxxx, 00000, Attention: Xxxxxxx X. Xxxxxx,
Esq. All notices hereunder shall be effective upon receipt by the party to
which it is addressed.
13. PARTIES. Hampshire represents that it is authorized to act as
Representative on behalf of the several Underwriters named in Schedule I hereto,
and the Company shall be entitled to act and rely on any request, notice,
consent, waiver, or agreement purportedly given on behalf of the Underwriters
when the same shall have been given by Hampshire on such behalf. This Agreement
shall inure solely to the benefit of, and shall be binding upon, the several
Underwriters and the Company and the persons and entities referred to in Section
8 who are entitled to indemnification or contribution, and their respective
successors, legal representatives, and assigns (which shall not include any
buyer, as such, of the Firm Stock or the Additional Stock), and no
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other person shall have, or be construed to have, any legal or equitable right,
remedy, or claim under, in respect of, or by virtue of this Agreement or any
provision herein contained. Notwithstanding anything contained in this
Agreement to the contrary, all of the obligations of the Underwriters hereunder
are several and not joint.
14. CONSTRUCTION. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
conflict of laws. Time is of the essence in this Agreement.
15. CONSENT TO JURISDICTION. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, the Company waives personal service of any summons, complaint, or
other process and agrees that service thereof may be made in accordance with
Section 12. Within thirty (30) days after such service, or such other time as
may be mutually agreed upon in writing by the attorneys for the parties to such
action or proceeding, the Company shall appear or answer such summons,
complaint, or other process. Should the Company fail to appear or answer within
such thirty-day (30) period or such extended period, as the case may be, the
Company shall be deemed in default and judgment may be entered against the
Company for the amount as demanded in any summons, complaint, or other process
so served.
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If the foregoing correctly sets forth the understandings among the
Representative and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
AMBASSADOR EYEWEAR GROUP, INC.
By:
--------------------------------
Name:
Title:
Accepted as of the date first above
written in New York, New York
HAMPSHIRE SECURITIES CORPORATION*
By:
---------------------------------------
Xxxxxxx X. Xxxx, Managing Director
*On behalf of itself and the other several
Underwriters named in Schedule I hereto.
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